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NMI gets $25M bond anticipation note from bank

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THE Commonwealth government has received from Bank of Guam a $25 million bond anticipation note, Finance Secretary David DLG Atalig informed the Legislature last week.

A bond anticipation note or BAN is a short-term interest-bearing security issued in advance of a larger, future bond issue.

Atalig told Senate President Victor Hocog and Speaker Blas Jonathan Attao that Finance received on June 23 BOG’s letter of approval for a $25 million bond anticipation note at an 8% fixed interest rate for 15 years.

He said this approval is a “positive step in increasing the financial reserves of the Commonwealth government to relieve the immediate and outstanding balance to the Settlement Fund.”

The bond anticipation note, he added, also “allows for more positive developments in the eventual float of a pension obligation bond that will alleviate a substantial amount of general fund resources to commit to addressing the mounting costs of public services during this crisis.”

The CNMI government, Atalig said, is tapping the financial resources provided by a bond anticipation note in order to make timely payments to the Settlement Fund.

The Settlement Fund owns a consent judgment totaling $779 million, which the SF may enforce against the CNMI government in federal court if the CNMI government fails to timely pay its obligations due under the settlement agreement.

“In an attempt to ensure the CNMI government is able to meet its current and future settlement fund obligations, the CNMI Department of Finance, in collaboration with the Commonwealth Development Authority and its counsels, has engaged in a lengthy negotiations process with the Bank of Guam management to undertake a pension obligation bond,” the Finance secretary said.

Atalig said the CNMI government has remitted to the Settlement Fund $24.3 million of the amount. The $651,560 cumulative bond issuance cost was deducted from $25 million.

He said $1,735,837 was for the 25% retroactive payment for retirees encompassing three pay periods: April 15, 2020, April 30, 2020, and May 15, 2020. Following these transactions, he added, $1,073,411 was reimbursed to the CNMI government general fund.

Atalig said Finance and CDA are still in communication with  bond counsels to pursue approximately $65 million in a pension obligation bond for repaying the bond anticipation note and the minimum annual payment for FY 2021 totaling $41 million.

He said Finance believes that “the short-term repercussions to government revenues caused by the Covid-19 pandemic created the necessity to shift the judgment obligation to the Settlement Fund into an amortized debt service obligation.”

He added, “Doing so relieves significant resources to provide continuity of essential government services and mitigates the economic impacts of austerity through continued level of government expenditures.”

 


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